If I got premium tax credits, do I have to file a tax return?

Yes, if you got premium tax credits for 2014, you have to file a federal tax return.  Even if you have never filed before, starting in 2014 if you got tax credits you have to file a tax return.

Your premium tax credits are based on the income you report to the IRS.  When you applied for health insurance through Covered California, you had to estimate your family income.  At tax time, you have to let the IRS know what your family’s actual income was for the year.

How do I know if I already got premium tax credits?

Lots of people may not realize they got premium tax credits.  If you applied when you enrolled, you don’t actually “get” the tax credit every month.  The IRS pays your premium tax credit directly to your health insurance plan.  Your monthly premium costs are lower as a result.

The only way to get premium tax credits is to buy from Covered California.  If you bought from Covered California, it will send you a tax form, called the Form 1095‐A, by January 31, 2015.  The Form 1095‐A will tell you if you already received premium tax

credits or not.  It will also tell you the exact amount of the tax credits you got each month.

Covered California plans pair well with Health Savings Accounts

HSAs can be used to lower your MAGI and qualify for better cost assistance on the Health Insurance Marketplace, this makes high deductible Silver plans very attractive.

We highly recommend using a Health Savings Account (HSA) if your plan has an annual deductible of more than $1,300 for self-only coverage or $2,600 for family coverage.

Health Savings Account Overview

All funds you put in your HSA are 100% tax deductible from gross income and can be used tax free to pay for out-of-pocket medical expenses, including dental and vision.  There are limits to the amount of money you can put in tax free and the amount of money you can use tax free as well. Funds roll over year to year and can be used with Medicare after retirement. If you want to take money out of the account for non-medical reasons you must pay taxes and a 20% penalty.

Other Medical Savings Accounts include Flexible Spending Accounts (FSAs) and Archer Medical Savings Accounts (MSAs).

Who Should Use a Health Savings Account

Anyone with a high deductible plan can use a Heath Savings Account.  HSAs can be used by individuals and families who buy private insurance and by employees and employers. Specifically your plan should state that it is a High Deductible Health Plan (HDHP) and is HSA eligible.


If you qualify for cost assistance on the Marketplace you can use an HSA to bring down your total Modified Adjusted Gross Income, as Health Savings Accounts and thus qualify for more subsidies. So you may want to consider a Silver HSA eligible plan.
HSAs and High Deductible Plans

You can only pair an HSA with a High Deductible Health Plan (HDHP). Your plan is considered a High Deductible plan if it has an annual deductible of more than $1,300 for self-only coverage or $2,600 for family coverage

High deductible health plan. For calendar year 2015, a “high deductible health plan” is defined under § 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,300 for self-only coverage or $2,600 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,450 for self-only coverage or $12,900 for family coverage. IRS

Are Health Insurance Premiums Tax Deductible?

Every day I hear small business owners, entrepreneurs, and free-lancers ask, “are health insurance premiums tax deductible?” The rules about when health insurance premiums are tax deductible can be confusing.

Whether you are an individual, self-employed worker, or small business owner, here is a simple breakdown about when health insurance premiums are tax deductible.

As an individual, your unreimbursed health insurance premiums are generally deductible if you paid for your health insurance premiums with your own after-tax money.

For example, if you bought an individual or family health insurance policy on your state’s health insurance exchange, the money you paid toward your monthly health insurance premiums (after health insurance tax credits are applied) can be taken as a tax deduction. You’ll list this deduction as a medical expense on Schedule A of Form 1040.

However, if you pay for a portion of your workplace premium pre-tax through a payroll deduction, this amount would not be deductible.

If you’re covered under Medicare, Medicare Part B, Part D prescription coverage, and Medigap supplemental premiums are deductible. Medicare Part A is usually not deductible.

Lastly, there is a limit to how much you can deduct. You may deduct only the amount by which your total medical expenses exceed 10% of your adjusted gross income or 7.5% if you or your spouse is 65 or older.

For more information on health insurance tax deductions for individuals, see IRS Publication 502.

Self-Employed Workers

If you are self-employed, you’ll likely be able to deduct your health insurance premiums, including age-based premiums for long-term care coverage. The line 29 deduction on the 1040 return is still available to those whose business income shows a profit, who are not eligible for employer-provided insurance (either from a side job or a spouse’s job), and who meet other criteria. If you received a health insurance tax credit, you would list the actual out-of-pocket cost to you, not including any tax credit received.

Small Businesses

If you are a small business owner, health benefits you offer to employees may be tax-deductible as a business expense.

  • Group health insurance premiums you pay are tax deductible as a business expense.
  • Reimbursements made through formal reimbursement plans are often tax deductible as a business expense.


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